A core defect in the pathogenesis of both prediabetes and type 2 diabetes is ?-cell dysfunction, with insulin resistance and ?-cell dysfunction also being prominent. Attempts to prevent type 2 diabetes and its progression have shown that aside from intensive lifestyle, the thiazolidinediones (TZDs) are most effective. Both these interventions improve insulin sensitivity and presumably rest the ?-cell, thereby improving its function. However, it is not known whether the benefits on ?-cell function are maintained beyond the active intervention period. Incretin-related medications, including glucagon-like peptide-1 receptor agonists (GLP-1RA), improve islet function, but their ability to prevent diabetes and slow its progression is unknown. We thus propose a feasibility study in subjects with prediabetes and drug naive, mild type 2 diabetes to address our hypothesis that aggressive glucose lowering with the combination of an insulin sensitizer and an incretin mimetic will lead to recovery of islet function that will be sustained off treatment. We will undertake a two-arm, double-blind study in which subjects with prediabetes and drug-naive, recent onset, mild type 2 diabetes (HbA1c <7%) are randomized to receive the combination of the TZD pioglitazone and the GLP-1RA liraglutide or matching placebo for 12 months, followed by a 12-month washout period. ?-cell function, ?-cell function, insulin sensitivity and glucose tolerance will be assesse using both intravenous and oral tests. The use of these tests will allow us to determine how well simpler measures of ?-cell function, ?-cell function and insulin sensitivity from an oral glucose tolerance test correlate to more sophisticated measures obtained from intravenous testing. We will also create a sample repository in order to measure biomarkers and determine whether they predict glucose metabolism at baseline and the response to therapy. These studies will provide important new insight into the ability of aggressive glucose lowering, achieved with the combination of a TZD and GLP-1 RA, to prevent the progressive loss of ?-cell function in prediabetes and type 2 diabetes. Further, they will inform regarding the utility of simpler measures for assessing glucose metabolism in large scale clinical trials.